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Skyline Bankshares, Inc. (SLBK)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 delivered a clean rebound in profitability with net income of $2.50M ($0.45) and materially higher adjusted EPS of $0.58 excluding $0.92M merger costs; net interest margin (NIM) inflected to 4.10% from 3.78% in Q3, a key upside surprise vs intra-year trend .
  • Loan growth remained robust: core loans rose $31.4M in the quarter (13.13% annualized) while period-end loans reached $984.5M; deposit balances were stable at $1.09B with mix continuing to tilt toward higher-cost time deposits amid competitive pressures .
  • Integration of Johnson County Bank (JCB) progressed smoothly; core systems converted in November with $3.4M core deposit intangible and $4.6M goodwill recognized; acquisition added $87.2M loans and $125.3M deposits, bolstering scale and earning assets .
  • Key watch items: deposit betas still rising (“could increase in the near term”), noninterest expense elevated from merger/integration, and higher unrealized securities losses in Q4; asset quality remains solid with NPLs/loans at 0.26% and ACL/loans at 0.82% .

What Went Well and What Went Wrong

  • What Went Well

    • Margin inflection and earnings leverage: “net interest margin increased to 4.10%” vs 3.78% in Q3; adjusted ROAA rose to 1.06% (annualized), supporting stronger core profitability .
    • Strong core loan growth: “core loan growth was $31.4 million… annualized rate of 13.13%,” positioning for continued earning asset momentum .
    • JCB integration executed: “core data systems conversion completed in November,” with management emphasizing a seamless transition and future growth opportunity in Tennessee .

  • What Went Wrong

    • Funding costs remain a headwind: deposit interest expense rose YoY and “could increase in the near term” given competitive pressures, particularly on time deposits .
    • Expense elevation: noninterest expense rose 30% YoY to $10.3M on integration costs (Q4 merger-related: $0.92M), duplicate cores, and higher personnel/branch costs .
    • AOCI volatility and securities: investment securities declined $5.6M in Q4 driven by a $4.1M increase in unrealized losses as rates moved higher; TBV/share remains below 2023 levels .

Financial Results

Metric (USD)Q4 2023Q2 2024Q3 2024Q4 2024
Net Interest Income ($M)$8.98 $9.10 $9.93 $11.57
Noninterest Income ($M)$1.76 $1.67 $1.85 $2.07
Total Revenue (NII + Noninterest) ($M)$10.74 $10.77 $11.78 $13.63
Provision for Credit Losses ($M)$0.07 $0.07 $0.74 $0.21
Noninterest Expense ($M)$7.91 $8.38 $9.63 $10.30
Net Income ($M)$2.16 $1.81 $1.06 $2.50
Diluted EPS ($)$0.39 $0.33 $0.19 $0.45
Adjusted EPS ($, non-GAAP)N/A$0.39 $0.36 $0.58
Net Interest Margin (%)3.69% 3.72% 3.78% 4.10%
ROAA (%)0.83% 0.69% 0.37% 0.82%
ROAE (%)11.05% 8.81% 4.82% 11.23%
Consensus EPS ($)N/A (S&P Global consensus unavailable)———
Consensus Revenue ($M)N/A (S&P Global consensus unavailable)———
  • Segment breakdown: Not applicable; the company reports as a single banking segment .

Balance Sheet and KPIs

KPIQ4 2023Q2 2024Q3 2024Q4 2024
Total Assets ($B)$1.05 $1.06 $1.21 $1.22
Loans (Period End, $M)$817.70 $833.61 $953.12 $984.46
Deposits (Period End, $M)$928.74 $948.11 $1,085.91 $1,092.20
NPLs / Loans (%)0.21% 0.19% 0.18% 0.26%
ACL / Loans (%)0.82% 0.82% 0.82% 0.82%
Book Value / Share ($)$14.84 $15.01 $15.72 $15.69
Tangible BV / Share ($)$14.09 $14.30 $13.60 $13.62
Dividend Declared / Share ($)$0.00 $0.00 $0.23 $0.00

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Formal financial guidanceFY/Q4 2024None providedNone provided in 8-K or releasesMaintained (no guidance)
  • Management did not provide numerical forward guidance; commentary highlighted ongoing deposit pricing competition and integration activities, but no quantified outlook ranges were issued .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 2024, Q3 2024)Current Period (Q4 2024)Trend
Net Interest MarginNIM up to 3.72% in Q2 from 3.64% prior ; further to 3.78% in Q3 NIM rose to 4.10% in Q4 Improving
Deposit Competition/PricingAnticipated higher deposit costs; migration to time deposits ; reiterated in Q3 “Interest expense on deposits could increase in the near term” with ongoing competition Persistent headwind
Loan GrowthSolid organic growth through H1 ; strong core growth in Q3 (ex-JCB +$32.5M) Core loans +$31.4M in Q4 (13.13% annualized) Strong
JCB Acquisition IntegrationPending close (Q2) Closed 9/1; core conversion recently completed, full integration targeted by year-end (Q3) Core systems conversion completed in Nov; integration ongoing (Q4)
Asset QualityNPL/Loans 0.19% (Q2) NPL/Loans 0.18% (Q3) NPL/Loans 0.26% (Q4); ACL/Loans ~0.82%
Securities/AOCIModest changes H1 Unrealized losses improved in Q3 with rate declines Q4 saw +$4.1M unrealized losses as rates rose

Management Commentary

  • “Earnings were strong, especially when adjusted for direct merger-related costs, with an adjusted annualized ROAA of 1.06%. During the quarter our core loan growth was $31.4 million… Our net interest income increased… and our net interest margin increased to 4.10%… Net income also increased from the third to the fourth quarter when adjusted for nonrecurring, merger-related costs.” — Blake Edwards, President & CEO .
  • “We continued the integration of Johnson County Bank… with the core data systems conversion completed in November… We look forward to creating a positive impact in Tennessee while continuing to offer an unmatched customer experience…” .
  • Funding outlook: management noted that deposit interest expense “could increase in the near term” amid competitive pressures and continued migration to higher-rate deposits .

Q&A Highlights

  • No earnings call transcript was available; therefore, Q&A themes and specific analyst inquiries are not available for this quarter [ListDocuments showed no earnings-call-transcript for SLBK].

Estimates Context

  • S&P Global consensus estimates for Q4 2024 EPS and revenue were unavailable at the time of analysis (small-cap/OTC coverage is often limited). As a result, we cannot present vs-consensus comparisons for Q4 2024.

Key Takeaways for Investors

  • Core profitability inflected: NIM expanded 32 bps QoQ to 4.10% and adjusted EPS stepped up to $0.58, signaling positive operating leverage even as funding costs remain elevated .
  • Scale benefits from JCB: acquired $87.2M loans and $125.3M deposits; core systems converted in November, positioning SLBK to capture synergies and growth in new Tennessee markets .
  • Deposit beta watch: management cautions deposit costs may rise near term; time deposit mix continues to weigh on funding costs—monitor trajectory into 1H25 .
  • Expense normalization potential: Q4 included $0.92M merger costs and duplicate core processing; absent these, adjusted profitability metrics were materially higher, pointing to operating leverage as integration completes .
  • Asset quality solid: NPL/loans at 0.26% and ACL/loans at ~0.82% provide cushion; no signs of credit stress in disclosed metrics .
  • Securities/AOCI sensitivity: $4.1M increase in unrealized losses in Q4 reflects rate-driven marks; TBV sensitivity remains a consideration under rate volatility .
  • Setup into 2025: With NIM momentum, organic/core loan growth, and integration synergies, upside hinges on managing deposit costs and capturing scale efficiencies; absence of formal guidance suggests near-term execution will drive narrative .

Supporting detail and additional data points

Acquisition accounting and balance sheet impacts

  • JCB acquisition summary: $154.1M assets acquired (incl. $87.2M loans); $133.8M liabilities assumed (incl. $125.3M deposits); CDI $3.4M; goodwill $4.6M .
  • Period-end balances: Assets $1.22B; Loans $984.5M; Deposits $1.09B (Q4 2024) .

Income statement drivers

  • Q4 2024: Interest income totaled $15.44M (loans +$3.70M YoY), deposit interest expense +$1.24M YoY; noninterest income $2.07M; noninterest expense $10.30M (incl. $0.92M merger-related) .
  • Annual view: 2024 NII after provision $38.35M vs $35.65M in 2023; deposit interest expense +$6.03M YoY; merger-related expenses $2.42M in 2024 .

Balance sheet and credit

  • Asset quality: NPL/loans 0.26% (Q4), 0.18% (Q3), 0.19% (Q2); ACL/loans ~0.82% throughout 2024 .
  • Securities/AOCI: Q4 decrease in AFS securities by $5.6M with +$4.1M unrealized loss; equity down QoQ by OCI despite earnings .

Dividend

  • Dividends declared per share: $0.00 in Q4; $0.23 in Q3; $0.00 in Q2 .